The spree of dollar benchmark issuance from Asian borrowers appears to have come to an end, foundering on renewed uncertainty in the eurozone. While ICBC was on the road pitching a Regulation S deal yesterday, it appeared to be the only big name contemplating an issue. Instead bankers were this week reassessing the outlook for new issuance, and pondering what to conclude from the issues that got away before the window closed.

The last two big dollar deals before Greece’s announcement of a planned referendum were a $500 million lower tier two bond from Bank of East Asia and a $750 million print from Bank of China (Hong Kong). Between them they encapsulate the extraordinary volatility in the markets over the last seven days.

Bank of East Asia’s deal, which finally priced on Friday after initially being slated for Thursday, was extraordinary for the dramatic movement in its pricing over a period of two days. The 10.5 year bond, with a call at 5.5 years, was originally marketed with guidance of 500 basis points over Treasuries plus or minus 12.5 basis points. That was on Thursday afternoon. Later that day it moved to 450 to 475 basis points over. Sensing a radically changing market tone as the mood around the EU debt crisis appeared to ease, the leads then decided not to close the books – which by that stage had garnered over $6 billion in orders – but to tighten guidance again and push into Friday. Guidance then moved to 400-425 basis points, closing at the tight end having moved 100 points in barely 24 hours.

While the print appeared excellent news for the issuer, there was concern about what lead managers Citi, Deutsche Bank and UBS had been thinking in their initial guidance. Particularly now that markets have turned sour, rival bankers have accused the leads of mis-managing the deal and damaging fragile sentiment at the expense of subsequent potential issues. One calls it “completely mis-handled and badly executed.” He says that had the deal been correctly priced at the outset then it would not have subsequently underperformed (it has widened in secondary markets – as have all bonds as market conditions have deteriorated). “If they had done it properly and hadn’t put 500 points in people’s mind at the get-go, they could have priced at 400 and not seen it underperform.”

Those close to the deal do not appear especially proud of how it went – “unconventional would be the best description of how that went”, says one; “I wouldn’t pretend I’d want to run a trade like that every day,” adds another – but plead extraordinary circumstances. “The market movement that happened when we were marketing from Thursday lunchtime to Friday end of day were substantial,” says one banker. “The market rallied across every asset class but credit wise it was one of the most significant in recent history. You get seismic shifts like that once every five years.” He says that the borrower, having seen deals from Sun Hung Kai, Korea Development Bank and KNOC rally between 20 and 50 basis points immediately after launch, wanted to delay to Friday to avoid leaving money on the table. For example KDB, whose own $1 billion 5.5-year deal had been priced on October 27, tightened its guidance from 300 basis points to launch at 280, only to see it tighten to 260 on the morning of the 28th (it has since widened beyond its initial price).

This banker also says the unusual structure in the BoEA bond made price discovery challenging. Even at the tight revised guidance, the order book hit $4.4 billion.

By the time Bank of China (Hong Kong) hit the markets on Monday, sentiment was about to turn. This issue of five-year senior notes received a strong response in Asia, prompting initial price guidance of 290 basis points over treasuries to tighten to 280. But by the time European markets opened, problems were clearly afoot, and the Greek referendum announcement that day pushed stock markets down heavily. The deal raised the $750 million the issuer wanted – indeed, the total book was $2 billion – but had to place fully 80% of it into Asia, with just 4% going into the US, an exceptionally low number for a Rule 144a trade. This reflects how quickly sentiment had turned: cheerful in Asia in the morning, miserable in Europe and the US later.

The next morning BOCHK, along with all the new bonds of recent weeks, was trading significantly wider, frequently around 20 basis points wider than its issue price. While those close to the deal (leads were BOC International, Citigroup and Deutsche Bank) said the bonds had behaved no differently than the broader market, there was again a sense of annoyance from other bankers that the deal’s poor performance would make it much harder for anyone else to follow. Some said the leads should have done more to support the bonds in the secondary market.

So is that it now, the window gone? “Yes, in the immediate term,” says one banker. “CNH can try and plough on. But anything else is going to struggle.”

ICBC will be the name to prove if that is correct. Yesterday the Chinese bank was in Singapore on a roadshow that was due to take in London today and Switzerland next week for a Regulation S deal led by Barclays Capital, ICBC International and UBS as joint global coordinators, alongside HSBC and Standard Chartered as joint bookrunners. The issue will take place through ICBC subsidiary Skysea International Capital Limited, and is expected to be rated A1/A.

Another banker said he was telling clients to wait. “We have a very healthy pipeline, but at our end we have been very prudent on when we recommend people to go,” he says. “I had a call from an issuer this morning [Wednesday] and told them I recommend not to proceed in this market, because BOC underperformed and now sentiment is not good.”

HENDERSON

While US dollar markets look increasingly bleak for Asian issuers, Asian local currency markets appear robust. Alongside a series of issues in offshore RMB (see separate story), Henderson Land raised a S$200 million bond senior unsecured issue this week.

The Henderson deal was upsized from S$150 million during marketing and priced in line with guidance, at 260 basis points over SOR. DBS, HSBC, OCBC and UOB were lead managers on the deal, which carried a 3.865% coupon and came off the issuer’s US$3 billion MTN programme. It was about 1.5 times covered.

The majority of the deal was placed in Singapore (despite a Regulation S format), which helped the bookrunners launch it quickly – a day earlier than initially planned and almost immediately after the lead managers were formally mandated, in order to catch a brief moment of market positivity before sentiment turned, which it swiftly did.

Singapore is likely to remain a useful market for medium-sized fundraisings by well-regarded issuers. While foreign issuers are unlikely to raise truly significant volumes in Singapore dollars, it offers a reliable and consistent investor base, underpinned by the presence of private banks.

RMB

The offshore RMB market appears more resilient to European shocks than its dollar counterpart, with two new issues – one of them a landmark – taking place over the last week and a third on the road preparing to price.

The first, and much the most significant, was a RMB1.5 billion lower tier two issue for ICBC Asia last Friday. As discussed in last week’s section, this was not only the first subordinated debt in the dim sum market, but also the first lower tier two bond from an Asian bank to be Basel III compliant.

While Friday was clearly a good day to price a deal, given what happened to Bank of East Asia (see related story), what happened next is perhaps even more striking. While dollar bonds have widened dramatically, the ICBC RMB issue closed up on each of Monday, Tuesday and Wednesday this week; on Wednesday it closed at 100.3/100.5. “It’s a great trade given it is so new,” said someone close to the deal.

The deal was led by HSBC, ICBC International and Bank of China as joint global coordinators and bookrunners, alongside Credit Suisse, DBS and Goldman Sachs as bookrunners. All six had a lot of education to do in explaining to investors the non-viability loss-absorption clause, which is what makes the bonds Basel III compliant; it means that it the bank is declared unviable (which would be done by the Hong Kong Monetary Authority) the value of the bonds are written down to zero. The rule did not appear to put off investors; the total book crossed RMB5 billion from 83 accounts. The deal priced at at a yield of 6%, the tight end of 6-6.125% guidance. Unusually for the offshore RMB market, the deal was a 10 year non-call five structure.

As is commonplace in offshore RMB, Hong Kong and China investors dominated, accounting for 77% of the deal, with Singaporeans taking 9%, and Europeans and others 14%. Private banks were the biggest constituent by investor type, with 54%, followed by insurers with 20%, fund managers 11%, and hedge funds 7%.

On Wednesday another RMB issue was completed, this time from Tsinlien Group, which is the parent company of Tianjin Development Holdings. The issue came in the name Victor Soar Limited, with Tsinlien as guarantor.

This three-year deal raised RMB1.3 billion, but paid up for it, with a 5.75% coupon. It carries a put at 101% if the Tianjin municipal government ceases to own 100% of the guarantor, of if that guarantor ceases to control Tianjin Development Holdings.

It was led by a remarkable squad of bookrunners: DBS, Citic, Deutsche, Goldman Sachs, JP Morgan, Standard Chartered, UBS and Wing Lung Bank.

At the time of writing a third offshore RMB deal was on the road. Korean Air met investors in Hong Kong on Wednesday ahead of a deal expected to be three to five years in duration. China Merchants Bank and Shinhan Securities were lead managers on the deal.

Chris is a journalist specialising in business and financial journalism across Asia, Australia and the Middle East. He is Asia editor for Euromoney magazine and has written for publications including the Financial Times, Institutional Investor, Forbes, Asiamoney, the Australian Financial Review, Discovery Channel Magazine, Qantas: The Australian Way and BRW. He is the author of No More Worlds to Conquer, published by HarperCollins.